Delta Chief Announces Sweeping Cuts

September 28, 2004 (PLANSPONSOR.com) - Delta Air
Lines on Tuesday announced a sweeping series of cost-cutting
moves that includes a 10% pay cut for executives and others
and the elimination of retiree health benefits.

In a
memo
to airline employees from chief executive Gerald Grinstein,
the company announced:

an across-the-board pay reduction of 10% for
executives, supervisory and administrative, and
frontline employees (with smaller reductions for some
entry-level jobs)

the elimination of the Delta subsidy for retiree
and survivor health care coverage at age 65
and after, effective for those retiring after January
1, 2006.

increases to the shared cost of health care
coverage

the offering of two voluntary exit programs – one
an early retirement medical option and the other a
travel-based exit package – in an effort to minimize
the number of layoffs.

With all the cuts, Grinstein also announced that the
company is developing an Employee Reward Program that will
provide a combination of equity, profit sharing, and
incentive payouts tied to performance.

Also Tuesday, according to news reports, Delta’s pilots
said they have ratified an agreement allowing Delta to
employ newly retired pilots to prevent staffing shortages.
Delta has warned it would have to file for bankruptcy if it
didn’t slow the pace of early pilot retirements by the end
of September.

The agreement between Delta and its pilots also includes
written assurance from management that the company will not
file notice of intent to terminate the pilots’ pension plan
prior to February 1 even if the company files for
bankruptcy protection before then. The cuts do not affect
the pilots because they are unionized and have a contract
with the company.

“This is painful and difficult, particularly because you
already have been affected in various ways and you are
working harder than ever before,” Grinstein told employees
in the memo. “I did not want nor intend to ask everyone for
more sacrifice. But regrettably, the industry environment
and our company’s worsening financial situation have
deepened the gap between where we are and where we must be
to survive and succeed over the long term.”

Delta has already reduced its workforce by 16,000
employees in the last three years. Earlier this month, it
said it would cut up to another 7,000 jobs over 18 months
and shed its Dallas hub. The airline has lost more than $5
billion since 2001 and has racked up $20 billion in debt as
it has faced higher fuel prices and increased competition
from low-fare carriers.